State agrees to equalize Westar rates

Northern and southern customers of Westar Energy will soon pay the same rates for electricity, the Kansas Corporation Commission decided Monday.

The commission also soundly rejected a proposal by the city of Wichita that southern Westar customers receive refunds for having paid higher rates than their northern cousins since 1992, when Kansas Power and Light merged with Kansas Gas and Electric to form the company that became Westar.

KPL became Westar North while KGE became Westar South, but the two companies maintained separate rates.

Until recently, Westar South customers paid substantially more for power because of the company's investment in the $1.5 billion, cost-overrun-plagued Wolf Creek nuclear power plant near Burlington.

Today, southern customers pay slightly less per kilowatt hour because Wolf Creek debt has been paid down and restructured, while the cost of coal, the base fuel for Westar North, has gone up.

Experts in the case were divided on whether the trend would continue to benefit the southern customers or swing back in favor of the north as Wolf Creek ages and new power plants have to be added to meet growing energy demands.

In its ruling, the commission credited itself and Westar for moving the two systems' costs closer together.

"The Commission has pursued a policy to gradually decrease the differences in rates charged to Westar North and Westar South customers since the approval of the merger," of KGE and KPL, said a statement by commission spokeswoman Abbie Hodgson. "Over the course of the last 18 years, Westar has taken many steps to reduce disparities between rates ... and to integrate its operations into a single system to meet the combined needs of its customers."

The commission statement was similar to language that Westar has used consistently throughout the case to justify consolidation.

On Monday, company spokeswoman Erin La Row said Westar is satisfied with the commission decision.

"We've been moving in that direction since our merger back in 1992," she said. "Today, we operate as one business."

Opponents of rate consolidation, including Wichita, USD 259 and a coalition of large industrial consumers, argued that it's unfair to do it now.

They say it's likely that new pollution controls and taxes on carbon emissions will send rates for coal power soaring, while nuclear power costs are expected to be more stable.

"The City of Wichita is disappointed in today's rate consolidation decision," said a statement by Wichita Mayor Carl Brewer. "As we noted in our ... testimony to the KCC, the south territory served by Westar was penalized for 17 years because of an unfair rate structure."

The Wichita School District calculated that since the merger, residents of Westar South have paid about $3,000 a customer more for electricity — a total of $750 million overall, according to testimony in the commission case.

Exactly when and how consolidation will take place is yet to be determined.

As part of its order Monday, the commission directed its staff to open a new case so interested parties can get together and try to work out the details.

That's perplexing, said David Springe, chief consumer counsel for the Citizens' Utility Ratepayer Board, the state agency representing residential and small-business utility customers.

CURB supported consolidation and wanted it to be implemented rapidly as part of a "mini rate case" in which Westar is seeking to increase rates by about $19 million to pay costs related to adding new natural gas and wind power to the system.

A second proceeding on implementing consolidation will slow the process and require duplicating a lot of the evidence that was part of the case the commission decided Monday, he said.

"We got the 'yes' on the policy (of consolidation); we didn't get much else," Springe said.

"If we can collaborate and come up with a compromise, it's better than litigating," he said. "But I wouldn't give high odds on it."

He said he thinks the additional proceeding was ordered to try to work out some of the concerns expressed by Wichita and USD 259.

The mayor's statement said the city is "encouraged that the KCC will now conduct a separate proceeding to determine how that consolidation should be crafted."

Brewer said the city "will continue to argue for an equitable resolution that acknowledges the issues we have raised throughout this long and contentious process."